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[PODCAST] EU Open Rundown 8th September 2020

  • Asian equity markets traded mostly positive, following the upbeat performance in EU counterparts
  • Gains in the region were moderated after US President Trump suggested the idea of decoupling the US economy from China
  • UK PM Johnson is to reportedly tell the EU that the Brexit deal must be rewritten in order to protect the Union, according to The Telegraph
  • In FX, the DXY held on to mild gains above 93.00, EUR/USD briefly slipped below 1.18 and GBP remains pressured by Brexit concerns
  • Looking ahead, highlights include German Trade Balance, EZ GDP (F), US NFIB Small Business Optimism, supply from Netherlands and the US

CORONAVIRUS UPDATE

US CDC reported total coronavirus cases rose to 6.26mln from 6.23mln and total deaths rose to 188.5k from 188.1k, while a major newswire tally stated that US cases increased by at least 25,898 to a total of 6.32mln on and deaths rose by at least 263 to a total of 189.2k. (Newswires)

US President Trump commented that a vaccine could be ready as early as next month. (Newswires)

ASIA

Asian equity markets traded mostly positive, following the upbeat performance in EU counterparts given the lack of handover from US due to Labor Day, but with gains in the region moderated by inconclusive data and after US President Trump suggested the idea of decoupling the US economy from China. ASX 200 (+0.6%) attempted to reclaim the 6,000 level with Healthcare and real estate frontrunning the advances despite mixed data which showed Business Confidence slightly improved but remained in negative territory. Nikkei 225 (+0.5%) was kept afloat as participants digested the better than feared revisions to Q2 GDP which still showed large contractions, while KOSPI (+0.6%) was boosted as index heavyweight Samsung Electronics gains on reports it is to produce Qualcomm chips for 5G phones. Conversely, Hang Seng (-0.6%) and Shanghai Comp. (-0.3%) underperformed after US President Trump upped the anti-China rhetoric in which he said he is thinking about the possibility of decoupling the US economy from China and that it would not lead to monetary losses, while he suggested that China either faces decoupling or massive tariffs. Furthermore, the US is considering a ban on cotton from China's Xinjiang region over human rights concerns, and China unveiled an initiative to set global data security regulations in an effort to counter US attempts of banning Chinese technology from other countries. Finally, 10yr JGBs were higher in a continuation of Monday’s rebound with prices unfazed by the mostly positive risk tone and with today’s 5yr JGB auction results somewhat inconsequential as it printed relatively inline with the prior. 

PBoC injected CNY 170bln via 7-day reverse repos at a rate of 2.20% for a net injection of CNY 100bln. (Newswires) PBoC set USD/CNY mid-point at 6.8364 vs. Exp. 6.8338 (Prev. 6.8386)

US President Trump said he is thinking about the possibility of decoupling the US economy from China and that it would not lead to monetary losses, while he added that China faces decoupling or massive tariffs from US and that the US will prohibit federal contracts to companies that outsource to China. (Newswires)

US is mulling a ban on cotton from China's Xinjiang region over human rights concerns, which could occur as early as this Tuesday. Reports noted the potential ban could impact apparel and other products, although it added that the scope remains unclear such as whether it would cover all cotton products shipped from Xinjiang or China and if it will include items from other countries that contain Xinjiang cotton. (New York Times)

Chinese President Xi commented that China is to deepen reform and opening up, as well as expand domestic demand, while he added China will keep promoting economic globalization and multilateralism. (Newswires)

China Foreign Minister Wang Yi said China seeks to launch a global data security initiative which opposes undermining infrastructure or stealing data of other nations by using IT. The initiative will require firms to respect local laws and to not force companies to store data generated and obtained overseas in their home country, while it stated that firms should not create backdoor in services or products to illegally obtain data. (Newswires/WSJ)

China's State Council agreed on a guideline on deepening and widening trials on the opening of services sector in Beijing, with most opening-up measures reported to be unprecedented and will enable foreign financial institutions to enjoy pre-establishment national treatment in pilot programs. (Global Times)

Japanese Chief Cabinet Secretary Suga says if next PM chooses to call a snap election, then that should be the case, while he suggested to not have a pre-determined timeframe for revising the constitution. Furthermore, Suga said it is important to protect jobs, as well as continue business, and said they will conduct economic steps appropriate for the situation. (Newswires)

Japanese Revised GDP (Q2) Q/Q -7.9% vs. Exp. -8.1% (Prev. -7.8%). (Newswires) Japanese Revised GDP (Q2) Y/Y -28.1% vs. Exp. -28.6% (Prev. -27.8%)

UK/EU

UK PM Johnson is to tell the EU that the Withdrawal Agreement never made sense and is contradictory on Northern Ireland, while he is to state that it must be rewritten and believes the WA is legally ambiguous which would leave Northern Ireland isolated from the rest of the UK. (Telegraph) Separate reports note that senior Tories reportedly warned PM Johnson that diluting Britain's obligations under the Withdrawal Agreement is a dangerous move that raises the likelihood of a no-deal Brexit. (Times)

BoE's Haldane said extending the UK job retention scheme would prevent a necessary process of labour market adjustment and that the UK economic recovery isn't being given enough credit, while he added that UK consumers and businesses have been incredibly resilient and adaptive. (CityAM)

Barclaycard UK August consumer spending rose 0.2% Y/Y which was the first increase since February. (Newswires)

UK BRC Retail Sales (Aug) Y/Y 4.7% (Prev. 4.3%). (Newswires)

FX

The DXY traded above the 93.00 level and held on to the mild gains as price action marginally picked up from the US holiday lull, while its major counterparts were lacklustre in which EUR/USD briefly slipped below the 1.1800 handle and GBP/USD broke down support near 1.3150 amid the ongoing “no-deal” concerns which was stoked by reports UK PM Johnson is to tell the EU that the Withdrawal Agreement never made sense and is contradictory on Northern Ireland Furthermore, PM Johnson believes the Withdrawal Agreement is legally ambiguous and must be rewritten as it would leave Northern Ireland isolated from the rest of the UK. Elsewhere, USD/JPY traded rangebound with a 106.00 status amid the recent mixed data and antipodeans were also relatively unchanged after early momentum in AUD/USD faded and with the PBoC setting a stable reference rate.

Australian NAB Business Confidence (Aug) -8 (Prev. -14) Australian NAB Business Conditions (Aug) -6 (Prev. 0)

Australian Bureau of Statistics said payroll jobs fell by 0.4% during the month to August 22nd and that payroll jobs fell 2% in Victoria but rose by 0.1% for rest of the country, while it added that payroll jobs fell in Victoria for a 3rd week but at a slower pace. (Newswires)

COMMODITIES

WTI crude futures languished around the USD 39.00/bbl level amid a lack of any fresh developments to shift the narrative from the ongoing weak demand outlook and following the recent selling triggered by Saudi’s oil price cuts, while participants will also have to wait a day later for the inventory reports owing to the Labor Day holiday. Elsewhere, gold was restricted by the slightly firmer greenback as well as the mostly positive risk appetite, and copper traded sideways amid the uninspired tone across the complex and underperformance of Chinese markets.

GEOPOLITICAL

India’s Army allegedly crossed the Line of Actual Control in Shenpao mountain on Monday, according to the PLA Western Theatre Command, while China’s military is demanding India censure its soldiers that illegally crossed the line and fired warning shots on China’s border patrol guards. (Global Times/CGTN)

US

US President Trump said House Speaker Pelosi and Senate Minority Leader Schumer do not want to make a stimulus deal, while he added that he does not need to meet with them. (Newswires)

US House Oversight Committee is to investigate Postmaster General Dejoy following allegations he pressured staff to make campaign donations. (Newswires)

PG&E noted potential public safety power shutoff for Monday which may impact about 158k customers in parts of 21 counties in Sierra Foothills and North Bay area, California. (Newswires)

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